Often in many construction companies, the owner wears many hats, including that of “CFO”. But financial planning support from a qualified CFO can ease the stress of running a growing construction business. A chief financial officer (CFO) does more than construction accounting and financial management. They help make decisions that add value.
CFO job descriptions typically include:
- review current financial strategies;
- devise solutions to reduce financial constraints;
- lower financial risks; and
- ensure financial compliance with regulatory bodies.
But what else is specific to that of a construction company? And is a CFO a full time job? Many times a fractional or part-time CFO can suffice, especially in those early days of growth when a full time hire is out of reach, as discussed more below.
What Is a CFO for Contractors?
A CFO for contractors and construction companies is its own specialized field. A CFO in this industry must have intimate knowledge of:
- construction accounting;
- job costing;
- project management;
- labor costs;
- building regulations;
- procurement; and
- accurate reporting of financial statements.
Essentially, a CFO in the construction industry will understand the unique financial needs inherent to the building industry.
What does CFO stand for in Construction?
A CFO, or chief financial officer, is a corporate officer responsible for financial planning and management. Given how much nuance is in construction, t is also referred to as a Construction Financial Officer by industry insiders. So make sure you find someone with that experience. At a construction company, the CFO works with the CEO to make sure the company is financially healthy and growing.
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Benefits of a CFO of a Construction Company
The construction industry has unique challenges that a CFO can help navigate. They will understand seasonal fluctuations in revenue, construction processes and how to manage them.
Financial Planning for Independent Contractors: Identify Risks
Many risks come with managing finances for independent contractors and construction companies. These can be related to the actual construction process, inaccurate bidding processes, or high payroll expenses. A CFO will have experience mitigating financial risks and can help identify these risks early on in a new project.
Cash Flow: Improve Access and Processes
Cash flow management throughout a construction project is vitally important, but it can be an area of frustration. A CFO can help stabilize cash flow by implementing systems and processes to improve cash flow during each phase of a project and throughout the organization.
Future Growth: Prepare for Expansion
A CFO will have expertise in financial planning and forecasting. A construction CFO can use their specialized skills towards a responsible plan to promote long term growth.
For instance, if your company is eyeing a new project, a CFO can create a financial forecast to show the expected return on investment and help you determine if the project is feasible.
Growth in construction can also come through other ways, like buying up other construction companies or navigating subcontractor relationships with bigger entities.
Reporting Standards: Improve Communications
Inaccurate or insufficient reporting is a common issue in construction companies. This can be due to the complex nature of job costing and billing.
A CFO can help improve communications by implementing new standards and reporting processes. This is a key requirement to take on larger projects, as the simple methods won’t cut it for more sophisticated buyers and planners.
This ensures that all stakeholders have the information they need to make informed decisions about the construction project.
A CFO Doesn’t Need to Cost Six Figures!
inDinero’s fractional CFOs work part time with your company to save you money
Organizational Efficiencies: Implement Transformations
Relying on old technologies can limit revenue potential for contractors and slow getting into larger commercial or industrial projects. A CFO can help a construction company cut internal costs by implementing new systems and processes. This can be anything from automating invoicing, adopting cloud accounting practices, or developing a better method to track project costs.
Tips to Onboard a CFO for a Construction Company
Bringing a CFO into your company is an exciting process that will result in greater efficiencies and growth opportunities for a company. However, the sticker to hire a full-time CFO may be too much for an organization to take on easily. For instance, in 2019, an entry-level CFO in the US earned an average of $290K.
If cost is preventing you from the benefits of working with a CFO, consider outsourcing those tasks to a fractional CFO. These professionals work part-time or as-needed and can be much more affordable than filling a full-time CFO position.
Fractional CFO Services: Ideal for Construction Business Owners
Whether you are looking to fill a full-time or fractional CFO role, taking the time to properly onboard this executive is essential. Doing so will ensure that they are set up for success and can help your construction company reach new heights.
At inDinero, we offer fractional CFO services in the construction industry to companies that recognize the value and transformational power of having a fractional CFO. Please contact our team for more information about how we can help you.
Featured Photo Credit: Christina Hawkins